Chip Stocks Start Year Strong on Upbeat Nov. Data

A new report from the industry trade group Semiconductor Industry Association (SIA) indicated better performance for the group in November than is common for this time of the year. Sales for November jumped 23.4% year-over-year (YOY), compared to a 21.9% gain in October. Bernstein analyst Stacy Rasgon highlighted that a month-to-month rise of 1.8% marks an improvement from November’s average at a 2% decline. (See also: 2018 Will Be Mixed for Chipmakers: Morgan Stanley.)

The SIA report showed areas such as logic chips and DRAM memory chip performing better than normal, while NAND chips and microprocessor sales were in line with the historical average.

Money to Flow Back After Some Profit-Taking

In response to the report, Wells Fargo analysts deemed the numbers a “solid exit” for 2017. Wells analyst David Wong pointed out that integrated circuit (IC) sales gained 11% in November, while DRAM chip sales skyrocketed 72% and NAND flash posted a 46% surge in sales. He wrote that “growth in ICs excluding memory is stabilizing in the high single digit to low double digit percentage range.” Wong rates the market “market weight,” yet is more enthusiastic about a few players including Advanced Micro Devices Inc. (AMD), Intel Corp. (INTC), Applied Materials Inc. (AMAT), Skyworks Solutions Inc. (SWKS) and Microsemi Corp. (MSCC).

On Wednesday morning, AMD continued its rally, surging over 6% following a report that flagged a security flaw in Intel processors. The Register reported that the issue will require a significant security update of Linux and Microsoft Windows operating systems to work around it.

“The 2017 trends are continuing in 2018,” said 50 Park Investments Chief Executive Officer (CEO) Adam Sarhan. “You’re seeing a lot of money flowing back into the semiconductors,” he noted, pointing some profit-taking which occurred towards the end of last year.